Should bike sharing be subsidized? Or privatized?

August 29, 2014

I’m a fan of bike sharing, as regular readers of this blog know (see this and this), and a satisfied, albeit irregular, customer of Capital Bikeshare, the convenient and well-managed public bike-sharing system in Washington, D.C., which now extends into the suburbs of Maryland and Virginia.

There’s a potential cloud over bike sharing, though, and it is this: So far, at least, no big-city bike sharing system of which I am aware is financially self-supporting.

This doesn’t trouble me. Bike sharing is form of mass transit. If you believe, as I do, that subways and buses deserve taxpayer support, bike sharing does, too. It creates a slew of positive externalities, including reduced air pollution and greenhouse gas emissions, reduced traffic congestion, a healthier populace and the mobility that city dwellers without cars need to get to work or school. (You may be wondering, are cars subsidized, too? Perhaps, but not by as much as you would think, some say. But it’s complicated. A few years back in Slate, Dan Gross argued just the opposite, that governments provide massive subsidies to private car owners.)

In any event, we’ve learning from the bike sharing boom that bike sharing is very popular, but that at the current pricing levels — $75 for an annual membership, $15 for a three-day membership in Washington — it can’t pay for itself. New York’s Citibike was touted as a bike sharing system that would pay for itself with user fees and Citi’s marketing dollars, but it is millions of dollars in the red. Emily Badger of The Washington Post’s Wonkblog wrote a good analysis of the economics of the two systems.

A startup bike-sharing company called Zagster offers an alternative: private bike sharing. It provides bike sharing systems to companies, universities (including Yale and Duke), apartment buildings and hotels for their employees, students and guests. Lately, it’s been making headway in Detroit.

I wrote about Zagster this week for Guardian Sustainable Business. Here’s how my story begins:

But a nimble little bike-sharing startup called Zagster is making inroads in Motown. Last year, Dan Gilbert, the founder of Quicken Loans who has invested more than $1.3bn in Detroit, turned to Zagster to start a private bike-sharing network for his employees. The local utility company DTE Energy, as well as the United Way of Southern Michigan and several small companies, followed. This week, General Motors announced that Zagster will make its bikes available to 19,000 employees at the 330-acre GM Tech Center in Warren.

What’s more, Bill Ford, the executive chairman of the Ford Motor Co, has invested in Zagster through Fontinalis Partners, a venture capital firm that invests in “next-generation mobility”.

Tim Ericson, the 28-year-old co-founder and CEO of Zagster, told me: “We’re creating what is almost becoming a citywide bike sharing program, with no public funds and no use of public space.”

As you might imagine, I have some reservations about Zagster’s model. The more we privatize goods and services — private schools, private parks in the form of country clubs, Google’s private bus from SF to its campus, and the like — the less political support there will be for public schools, parks and transport.

Then again, I can’t envision bike sharing come to Detroit in any other way.